Jos. A. Bank Stands Its Ground

Jos. A. Bank Clothiers Inc. took the offensive in its effort to fend off a proposed takeover by Men’s Wearhouse Inc., entering talks of its own to buy fellow apparel retailer Eddie Bauer LLC and issuing a sharply worded rebuke to its rival’s latest bid to negotiate a deal.

Jos. A. Bank is in discussions for a possible takeover of Eddie Bauer, people familiar with the matter said this weekend. Such an acquisition could value Eddie Bauer at as much as $1 billion, one of the people said. A deal between the two companies isn’t imminent, another of the people said.

News of the possible Eddie Bauer takeover comes amid a monthslong, rancorous effort by Jos. A. Bank and Men’s Wearhouse, both discount men’s suit retailers, to buy each other. Jos. A. Bank announced its intent to buy larger rival Men’s Wearhouse in October. After that effort was rebuffed, Men’s Wearhouse mounted its own effort to buy Jos. A. Bank, which was in turn rejected.

If Jos. A. Bank consummated a deal with closely held Eddie Bauer, it would likely complicate or put an end to the Men’s Wearhouse quest to buy the company, in part by making it much more expensive. A number of shareholders of both companies want to see Men’s Wearhouse succeed in buying Jos. A. Bank, and shares of both companies have risen sharply since the possibility that they might merge arose in October.

Eminence Capital LLC, which owns significant stakes in both Jos. A. Bank and Men’s Wearhouse and wants them to combine, filed a complaint in a Delaware court in January seeking to block Jos. A. Bank from making an acquisition that the hedge fund fears would frustrate the Men’s Wearhouse effort to buy the company. Jos. A. Bank’s market capitalization is $1.6 billion, meaning that Eddie Bauer would be a relatively large bite for it to swallow.

Underscoring the level of hostility that has developed between the Jos. A. Bank and Men’s Wearhouse camps, Jos. A. Bank released a letter Sunday that rejected Men’s Wearhouse’s latest bid last week to bring its rival to the negotiating table. “Your recent letter makes a number of inaccurate and misleading claims,” reads the letter, which was authored by Chairman Robert Wildrick and other Jos. A. Bank directors, and addressed to Men’s Wearhouse Chief Executive Douglas Ewert. “These statements call into question the credibility of Men’s Wearhouse’s actions in pursuing its offer for Jos. A. Bank.”

The letter adds that Men’s Wearhouse received a so-called second request for information from the Federal Trade Commission in its review of the possible deal. Such requests sometimes herald a rocky road to antitrust approval of a proposed deal.

Buying Eddie Bauer would represent a change in direction for Jos. A. Bank. Eddie Bauer, founded in 1920 and based in Bellevue, Wash., serves a more diverse customer base than Jos. A. Bank does. While Jos. A. Bank is known for its affordable men’s suits, Eddie Bauer is more commonly associated with fleece and casual clothing for men, women and children. It also caters to the sporting set, selling items for hunting, shooting and other outdoor activities.

Eddie Bauer has 370 stores in the U.S. and Canada, in addition to a Web and catalog presence.

In 2012, Golden Gate Capital, the private-equity firm that owns Eddie Bauer, hired Michael Egeck, a former executive from Hurley International Inc. and The North Face, as CEO.

Jos. A. Bank’s bid for Men’s Wearhouse was backed by Golden Gate, which bought Eddie Bauer out of bankruptcy protection in 2009 for $286 million in cash plus the assumption of hundreds of millions of dollars in liabilities.

That Jos. A. Bank is exploring a deal away from Men’s Wearhouse doesn’t come as a surprise. The company, which turned down Men’s Wearhouse’s $1.5 billion offer in December, has said multiple times that it might pursue other takeover targets. In a securities filing in January, Jos. A. Bank said: “The company has been and is continuing to engage in preliminary negotiations that could result in an extraordinary transaction, including the acquisition of a business or assets from a third party that would be material to the company.”

A person familiar with the matter recently said that Jos. A. Bank has signed nondisclosure agreements related to possible acquisitions of other companies besides Men’s Wearhouse. It isn’t clear whether the company is seriously pursuing any other deal besides Eddie Bauer.

The emergence of Eddie Bauer as an acquisition target for Jos. A. Bank would be the latest unexpected twist in an often dramatic and unusual mating dance between Jos. A. Bank and Men’s Wearhouse. Early in the process, Men’s Wearhouse pursued a possible purchase of dress-shoe maker Allen Edmonds, people familiar with the matter have said. Allen Edmonds ultimately was sold to a different suitor, but the strategy at the time was viewed by some in the Jos. A. Bank camp as a defensive tactic.